A proposal to ban sports and political prediction markets issued under the Biden administration has been formally withdrawn by the Commodity Futures Trading Commission.
Summary
- The CFTC has withdrawn a 2024 proposal that sought to ban political and sports prediction markets.
- A September staff advisory warning businesses about litigation risks tied to event contracts has also been rescinded by the agency.
According to a Feb. 4 statement from CFTC Chair Michael Selig, the 2024 proposal reflected what he called “the prior administration’s frolic into merit regulation with an outright prohibition on political contracts ahead of the 2024 presidential election.”
The 2024 notice was the culmination of a multi-year effort by the Biden-era CFTC to categorize prediction markets as “gaming” and effectively block them from regulated exchanges.
By withdrawing the proposal, the commission has confirmed that it does not intend to issue final rules based on that framework.
Further, Selig said the CFTC will advance “new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act that promotes responsible innovation in our derivatives markets in line with Congressional intent.”
The CFTC has also withdrawn a September staff letter, which had warned businesses against offering sports-related event contracts due to ongoing litigation risks.
The CFTC’s latest move is expected to serve as another major tailwind for prediction markets such as Polymarket and Kalshi, following the agency’s pivot toward a pro-innovation mandate over the past year.
Prediction markets, which allow anyone to monetize forecasts on a wide range of events, most notably sports, have grown increasingly popular in the country, with new entrants such as Crypto.com and Coinbase adding to a growing list of platforms challenging traditional sportsbooks.
However, many of these offerings are facing legal pressure on a state level that conflicts with federal oversight, and Nevada remains among some of the most active states that have pushed back against such markets, arguing they are unlicensed gambling operations.
In the now-rescinded staff letter, the CFTC said it was aware of multiple state-level lawsuits and enforcement actions targeting companies facilitating event contracts.
“While intended to highlight litigation considerations, the advisory inadvertently created confusion and uncertainty for our market participants,” Selig said, adding that he will be working with staff on “event contracts rulemaking.”
Source: https://crypto.news/cftc-withdraws-biden-era-proposal-to-ban-sports-and-political-prediction-markets/
